Business Tech

With possible action by the Federal Trade Commission looming, an unidentified Dell executive is cited prominently in legal documents as a person who might exonerate Intel, or at least mitigate the severity of the charges leveled against it for alleged antitrust behavior. So, what is known about this Dell mystery man?

This week the Dell executive, referred to as "Mr. A," was cited throughout the European Union ombudsman's "decision" on on a complaint filed by Intel about the European Commission's ruling against the chipmaker. Ombudsman P. Nikiforos Diamandouros' November 18 decision found "maladministration" on the part of the Commission because of its failure to make a "proper note" of a meeting with Dell--represented most prominently by Mr. A in the the ombudsman's decision.

Diamandouros has been the The European Union's ombudsman since April of 2003.

Most importantly, Mr. A is brought up by Intel as a person who has made exculpatory statements--and therefore could refute allegations such as those made about Intel and Dell in New York Attorney General Andrew Cuomo's complaint against the chipmaker.

And who is Mr. A? He was "a senior Dell executive" and the person "responsible for Dell's relationship with Intel," according to the ombudsman's published statement.

What else is known about Mr. A? Intel asserts in its complaint to the Commission--which the ombudsman responded to in its decision--that "Mr. A's FTC [Federal Trade Commission] testimony exonerates Intel and contradicts the allegations contained in the statement of objections concerning Dell's relationship with Intel."

And Intel has had more to say about this person. "Mr. A again gave sworn testimony confirming that the key points made in his 2003 FTC testimony, to the effect that Dell did not have an exclusive relationship with Intel and that Intel did not 'threaten' or 'punish' Dell for considering a dual-source [Intel and AMD] strategy."

Also in the ombudsman's decision--which refers to Intel as the complainant: "It is clear from these events that the Commission sought to conceal and suppress exculpatory evidence. Also in the complainant's view, this misconduct (and the failure to make a complete note of the meeting which would have eliminated any debate as to what Mr. A said) constitutes a serious act of maladministration."

Intel spokesman Chuck Mulloy said Thursday that Intel continues to talk to the FTC. "Yes we are talking. We are continuing to answer their questions concerning our business practices and now we are also explaining the settlement we just completed with AMD [Advanced Micro Devices]," Mulloy said.

Dell announced on Tuesday that it has completed its $3.9 billion offer to buy Perot Systems. By accepting Perot's stock at $30 per share, Dell will own more than 90 percent of the company.

Dell's takeover of Perot has created a new business unit called Dell Services, which will provide IT services to customers. Dell's reach will now extend into technology hosting, consulting, and application outsourcing, among other segments.

Former Perot Chief Executive Officer Peter Altabef will become president of Dell Services, reporting directly to Dell Chairman and CEO Michael Dell. Altabef has steered Perot for the past five years as the company expanded its operations into more than 25 countries and captured sales of $2.8 billion in 2008.

"Dell Services will be a powerful organization with the extensive capabilities and global reach to address the needs of organizations of all types," said Altabef in a statement. "The Dell and Perot Systems integration teams have been extremely productive in their planning, and we are ready to work on behalf of all our customers."

Dell is looking at Perot to expand its niche in technology consulting and other services, combining its own large customer base with Perot's vast IT services. Also appealing is Perot's huge market in hospitals and medical facilities, a growing segment driven by the need to streamline and modernize the health care industry.

Dell revealed its intent to buy Perot Systems on September 21. No date was announced for completion of the acquisition, but Dell said it expects it to be done promptly.

Windows 7 has spawned a new breed of inexpensive laptops at retailers like Best Buy and Frys.

At many stores on Thursday, Best Buy refreshed almost its entire stock of laptops: all running Windows 7 and all sporting new model numbers. Frys--a megastore electronics retailer with locations throughout California, Arizona, and Texas--also refreshed many of its laptops with new Windows 7 models.

One of the most inexpensive Windows 7 arrivals is the Gateway model EC1410U. This tiny laptop is distinctly Netbook-like in appearance but uses a more powerful Celeron M ULV 743 processor (1.3GHz, 1MB cache) than the Atom-chip fare found in Netbooks. In addition to the Windows 7 Home Premium Edition 64-bit version, other features include 2GB of memory and a 250GB hard disk drive.

Small Gateway laptop comes in a Netbook-like package but uses a more powerful Celeron processor than the Atom chip found in Netbooks--and it's cheap at $399

(Credit: Best Buy)

Many seductive Windows 7 newcomers are categorized as "ultrathins." These slim designs are typically discernibly bigger than Netbooks (though, as evidenced by the Gateway above, it's now always clear-cut) and pack more processor horsepower. The Toshiba Satellite T-135 (model: T135-S1309), which falls into this category, is priced at $549 at Best Buy and comes with Windows 7 Home Premium Edition 32-bit operating system, a 13.3-inch display, a dual-core power-efficient Pentium processor, 3GB of memory, a 320GB hard disk drive (5400RPM), and built-in Web cam.

The HP dm3 (model: dm3-1035dx), also an ultrathin and also priced at $549, packs 3GB of memory ... Read more

Cages at Best Buy are stocked with new models preloaded with Windows 7: behind bars until October 22.

(Credit: Brooke Crothers)

Best Buy is locked and loaded for the Windows 7 launch.

And I don't use the phrase "locked and loaded" figuratively. "Locked" in that all the new Windows 7 machines are locked down behind cages. And "loaded" in that all the cages are full. (See photos.)

I visited a Best Buy Friday night in Southern California where the cages were loaded exclusively with new models preloaded with Windows 7. And I learned a few odd tidbits from a stoked salesperson who had definitely been drinking the Windows-7-is-totally-awesome Kool-Aid. Let me add that the information was conveyed to me at one store in Southern California and may not necessarily apply to all stores nationwide.

Dell is closing its desktop PC manufacturing plant in Winston-Salem, N.C.

The cost-cutting move will ax 905 jobs, with 600 workers set to be laid off in November and the rest in January, Dell said Wednesday.

"This is a difficult decision, especially for our North Carolina colleagues, but a necessary one for Dell customers and our company," Frank Miller, vice president of Dell's Public Business Unit Supply Chain, said in a statement.

Dell had announced some layoffs at the North Carolina plant in March but gave no indication that the plant itself might be in danger of shutting down.

This plant closure is just the latest in a series of efforts by Dell to shrink expenses worldwide by billions of dollars.

In 2007, the company said it would lay off 8,800 employees, or 10 percent of its global workforce. However, the company modified that number last year, cautioning workers to expect even deeper cuts.

Over the past few years, employees in Canada, Ireland, and, of course, the U.S. have gotten pink slips.

The appetite of consumers toward laptops over desktops was a factor behind the decision to close the North Carolina plant, which opened four years ago. Last year, Dell shut down its desktop manufacturing plant in Austin, Texas.

Dell enterprise CTO Paul Prince

(Credit: Dell)

SAN FRANCISCO--More than a decade ago, Intel ran into an issue trying to deliver what was to be the world's top-ranked supercomputer: it looked possible that its new Pentium Pro processors at the heart of the system might not arrive in time.

As a result, the chipmaker made an unusual move by paying Hewlett-Packard $100,000 to evaluate building the system using its PA-RISC processors in the machine, said Paul Prince, now Dell's chief technology officer for enterprise products but then Intel's system architect for the supercomputer. Called ASCI Red and housed at Sandia National Laboratories, it was designed to be the first supercomputer to cross the threshold of a trillion math calculations per second.

Intel ultimately met that 1-teraflops performance deadline using the Intel chips, HP dropped its PA-RISC line in favor of Intel's Itanium processor line, and the Pentium Pro paved the way for Intel's present powerhouse status in the server market. But the supercomputing division within Intel was phased out, and ASCI Red was its last job, Prince said in an interview here on the eve of the Intel Developer Forum.

The division had enough independence that it could have used another company's chips, but doubtless eyebrows would have been raised had a rival processor design showed up in such a high-profile machine that ultimately used more than 9,000 processors.

It wasn't the only hurdle the Intel group overcame in the design and construction of ASCI Red, which used ordinary processors but plenty of one-off technology including a customized operating system and Intel's own router chips to send data from through the system.

Sandia National Laboratories Vice President Rick Stulen and Intel designer Stephen Wheat look at ASCI Red's innards at the system's decommissioning in 2006 after nine years of use.

(Credit: Sandia National Laboratories)

The first version of the router chip had a data integrity problem, and Intel didn't have time to fully validate a fixed version even though the engineers knew what caused the problem, Prince said. However, in a presentation titled "Statistics for the Common Man," Prince convinced Intel management that a variety of worst-case scenario tests could reduce the validation time from more than a dozen weeks to about four to six weeks. He prevailed.

"It worked, and they didn't fire me," Prince said. ASCI Red, developed for the Energy Department's Accelerated Strategic Computing Initiative to simulate nuclear weapons physics in a computer rather than with real-world tests, led the Top500 list of supercomputers from June 1997 until November 2000, when IBM's ASCI White took the top spot.

Meanwhile, in today's world
Naturally Prince now is focused on the best directions for getting Dell servers, storage, and networking gear into customers' hands. And though he's comfortable with nitty-gritty chip details, he said customers these days are gravitating toward higher-level discussions.

"At this point nobody's keeping up with the gigahertz rating of chips," he said, no doubt to the delight of Intel and AMD, who ran into physical limits on clock speed and focused their attention on multiple processing cores and getting more work done in each tick of a chip's clock.

Instead, he said, customers are asking, "How does this fit into my virtual environment? What's my management look like?" Thus, Dell is leading a lot of marketing with virtualization, which lets a single physical computer house many independent operating systems called virtual machines. Dell had expected Microsoft and various Linux players to challenge virtualization expert and EMC subsidiary VMware, but it's withstood the competition so far, he said.

Dell itself has about 6,000 VMware-hosted virtual machines running on about 620 real machines in its own computing infrastructure, but that's only a small fraction of the 12,000 physical servers total the company has. Some physical machines house as many as 20 virtual machines, but for business-critical tasks, Dell puts 10 virtual machines on a physical server, Prince said.

In Dell's analysis, using virtual machines saved $60 million in capital equipment expenses, he said. But virtualization poses problems, too--the virtual equivalent of server sprawl, in which new servers are added to a company's infrastructure faster than administrators can keep up.

"You can deploy new servers in hours instead of weeks. The downside is you crank 'em out, so you have this proliferation of resources," Prince said, and virtual machines don't come with handy tracking technology. "The reason it's hard to get rid of them is it's hard to track them. There's no asset tag. There's no depreciation on a virtual server."

Hardware still matters
Though sales have moved to a higher level, hardware details still matter, Prince said. One he's most excited about is solid-state drives, which use flash memory rather than the spinning platters of conventional hard drives.

Many SSDs today directly replace hard drives, using the same size and SATA or SAS communication protocols to connect to a machine in a way that makes them interchangeable with conventional hard drives. But Prince is more interested in a technology that bypasses that older hard drive technology in favor of a more direct connection over a computer's PCI Express subsystem.

Companies including Fusion-io and Texas Memory Systems supply the technology, and Prince is among those in the server realm who like the idea. "You can get a massive performance upgrade in terms of IOPS," or input-output operations per second.

He's also a believer in a technology called wear leveling, which moves data around the physical storage device so elements don't get overused and therefore effectively worn out. "The life has to be better than enterprise-class drives," he said.

Prince also predicted the eventual triumph of Ethernet over more special-purpose high-speed network fabrics, Fibre Channel and InfiniBand. Fibre Channel will reach 16 gigabits per second, probably won't move beyond 40 gigabits per second, but Ethernet is headed for 40 and 100 gigabits per second today with 400 gigabits and even 1 terabit per second on the horizon, he said.

"Everybody is converging on Ethernet as the high-performance fabric of the future," Prince said.

This was originally posted at ZDNet's Between the Lines.

Dell's $3.9 billion acquisition of Perot Systems gives the company a better foothold in the IT services market, but it's really just the beginning. It's a down payment on the company's big plans to transform its business.

As noted earlier (statement, Techmeme), Dell is paying $30 per share for Perot Systems, which is heavily focused in the only two industries growing these days--health care and government. Perot and Dell had been long-time partners.

Dell had been talking about diversifying away from its core PC and server businesses for months, but the Perot purchase is the first move that illustrates the company is serious about its transformation.

CEO Michael Dell said on a conference call the Perot purchase is a platform that the company can use to acquire more companies. Dell specifically said it will look for more deals similar to its EqualLogic purchase. Dell also said that Dell and Perot would be able to grow faster combined. "We will leverage Perot's services capability across Dell's customer base," said Dell. "This acquisition makes great sense."

Indeed, Dell is certainly focused on making sure the Perot integration goes smoothly. Perot CEO Peter Altabef will head a services unit comprised of joint Perot-Dell services units.

And the two companies--both based in Texas, about 200 miles apart--hope proximity can make any integration smooth (even though about a third of Perot's employees are in India). Perot and Dell have partnerships for financing and targeting verticals like health care (48 percent of Perot's annual revenue) and government (25 percent of sales). Combining the companies was the best move to further the relationship, said Dell.

Officials said that Perot is one of the largest IT services providers to hospitals and physicians. President Obama has made health care IT a big focus to slow the rate of increasing costs.

However, there is an increased degree of difficulty for Dell. Perot has 23,000 employees. Altabef said he was "personally committed" to the deal and Michael Dell said that there is a good cultural fit between the two companies. That cultural fit--not to mention retention packages--will keep Perot talent on board, executives said.

Deal about growth
Dell CFO Brian Gladden noted that Perot "is a great anchor acquisition for Dell" and its platform can be applied to other industries.

Gladden said that "growth is the primary motivation for this transaction."

Aside from utilizing Perot's foothold in health care and government agencies, Dell said that the two companies can grow faster and build "next-generation capabilities."

Dell also added that Perot can enhance the company's ability to bring next-generation data center and virtualization capabilities to customers. Think of the deal as one big cross-selling proposition. Dell can leverage Perot's health care and government customers to sell more hardware. Perot, which only has 27 percent of its revenue tied to commercial accounts, gets Dell's enterprise heft.

The big question is whether Dell can take Perot's capabilities and extend them to other industries. If it can, Dell may succeed at delivering the growth it's hoping for.

In a graphic, Dell's big plan for Perot looks like this:

(Credit: Larry Dignan/ZDNet)

While Dell's plan for Perot Systems looks good on paper it will remain a small services player relative to rivals.

Dell said that it can bolt together Perot's services business with its own and create a global services company. However, today the Dell-Perot services business is an $8 billion unit. "We can make a different services company with a new set of capabilities," said Dell.

(Credit: Larry Dignan/ZDnet)

Dell will have to deliver new capabilities if it's to enter the big leagues in services. For instance, IBM's global technology services unit had $39.3 billion in revenue in 2008 with its global business services division delivering sales of $19.6 billion. As a result, IBM doesn't have to rely on its hardware business as much as Dell does.

It's a similar story for HP, which bulked up its services via the purchase of EDS. For the nine months ended July 31, HP's services revenue was $25.7 billion. Of that sum, infrastructure technology outsourcing and technology services represents the bulk of the revenue pie.

Dell's challenge: Scale Perot's services unit with "disruptively great value" so it can play catch-up to the big services guns.

(Credit: Larry Dignan/ZDNet)

Update 9:40 a.m. PDT: Added details of the movement of shares for Dell and for Perot Systems.

Dell announced Monday that it will buy IT services provider Perot Systems for $3.9 billion.

The two companies expect to provide a broad range of IT services and packages, expanding the global reach of Perot Systems and selling Dell computer systems to additional Perot customers. The move could be a shot in the arm for Dell, giving it a way to diversify beyond its bread-and-butter business of selling hardware.

"This significantly expands Dell's enterprise-solutions capabilities and makes Perot Systems' strengths available to even more customers around the world," said Dell CEO Michael Dell. "There will be efficiencies from combining the companies, but the acquisition makes such great sense because of the obvious ways our businesses complement each other."

Perot Systems, founded by one-time presidential candidate Ross Perot, provides IT services and business solutions to customers in health care, government, manufacturing, banking, and insurance. The company has built a large customer base in North America, Europe, the Middle East and Africa, and Asia.

"Today's announcement is the next step in formalizing a relationship that has flourished for some time," said Perot Chairman Ross Perot Jr. "When my father founded Perot Systems he envisioned a global information-technology leader. The new, larger Dell builds on that promise and its own successes by taking Perot Systems' expertise to more customers than ever."

Under the agreement, PC and server maker Dell will acquire all outstanding common stock of Perot Systems for $30 a share in cash, a 65 percent premium over Friday's closing price. Subject to the usual government approvals, the deal is expected to close in Dell's November-January fiscal quarter.

In Monday morning trading, Perot Systems' shares were up by essentially that same margin, to $29.60. Dell's shares were down about 4 percent to $15.92.

Once the deal is completed, Perot Systems will become Dell's services unit, headed by Peter Altabef, current Perot Systems CEO. Ross Perot Jr. is expected to be considered for a slot on Dell's board of directors.

Dell and Perot Systems have worked together in the past. In April, for instance, they teamed up to get in on the ground floor of electronic health records, a field that is expected to grow substantially in coming years as hospitals and physicians increasingly digitize patients' medical records. The companies also talked about the ability to run some medical applications in a hosted, "private cloud" offering to help make costs more manageable.

One of the largest computer makers in the world, Dell has been hit hard by the global recession as its business customers hold off on upgrading their banks of servers and arrays of desktop and laptop PCs. In its most recent quarter, Dell's earnings were down 23 percent year over year to $472 million, on revenue of $12.76 billion, also down just over 20 percent.

Dell and Perot Systems say that over the past four quarters they have taken in a combined $16 billion in enterprise hardware and IT services revenue, with about $8 billion from enhanced services and support.

A year after the state of New York won its case against Dell and Dell Financial Services, the company will now pay up.

The PC maker will fork over $4 million to settle a case initially filed in 2007, New York's Office of the Attorney General said Tuesday. The initial suit brought by Attorney General Andrew Cuomo accused Dell of fraud, false advertising, and deceptive business practices, including offering misleading financing, and failing to honor rebates, warranties, and service contracts.

Cuomo won the suit in May 2008, when the company was found guilty of the accusations listed above as well as "abusive debt collection practices."

Tuesday his office released a statement saying that the $4 million would be used to compensate customers who were affected by Dell's practices. Besides the payout, the settlement requires that Dell change its advertising, sales, and financing practices. That includes making it clear to customers before purchase whether their warranty service contract is eligible for in-home service, and giving a percentage for how many people will qualify for an advertised promotional financing rate.